Jenkins v. iQIYI, Inc.

Background

Thomas Jenkins filed a proposed securities class action against iQIYI, Inc., and several of its executive officers and directors. The complaint asserted claims under Sections 11 and 15 of the Securities Act and Section 10(b) of the Exchange Act in connection with iQIYI’s March 29, 2018 initial public offering and later public statements. Jenkins alleged that the defendants made false or misleading statements about user numbers, revenue, and expenses. The proposed class included people and entities that purchased or acquired iQIYI American Depositary Shares or other iQIYI securities during the stated class period.

On June 5, 2020, iQIYI moved under the federal venue-transfer statute, 28 U.S.C. § 1404(a), to transfer the action to the Eastern District of New York. Jenkins did not file an opposition. The individual defendants, who the opinion states live in China, had apparently not yet been served.

Forum-Selection Clause

The deposit agreement for iQIYI’s American Depositary Shares stated that holders agreed that lawsuits against iQIYI arising from the agreement, the shares, or related transactions could be brought only in a state or federal court in New York, New York. The court concluded that the deposit agreement could bind Jenkins as an American Depositary Share holder and that the forum-selection clause warranted transfer. Because Jenkins did not oppose the motion, the court stated that he had not presented evidence of fraud that would justify finding the clause invalid.

Section 1404(a) Analysis

The court separately concluded that transfer was justified under the traditional Section 1404(a) analysis. It found that the action could have been filed in the Eastern District of New York because iQIYI had agreed to jurisdiction and venue in New York for suits involving the deposit agreement or its American Depositary Shares.

The court found that the interests of justice favored transfer. A similar federal securities class action was already pending in the Eastern District of New York. The two actions involved common defendants, the same underlying facts, similar Exchange Act claims, and the same requested relief for identical proposed classes. The court therefore found that consolidation was feasible and that this consideration outweighed any deference to Jenkins’s choice of forum.

The court also found that the Northern District of California provided no meaningful convenience to the parties or witnesses. It stated that none of the parties lived or did business there, iQIYI had no agent for service of process there, and there was no basis to conclude that witnesses with knowledge of the alleged conduct were located there. The Eastern District of New York also had a local interest because it was already considering the similar action, while the opinion stated that the parties had no relationship to the Northern District and none of the events giving rise to the case occurred there. The remaining factors were neutral or favored transfer.

Disposition

The court granted iQIYI’s motion to transfer. The clerk was directed to transfer the action to the United States District Court for the Eastern District of New York. Because the Northern District of California would no longer retain jurisdiction, the court terminated the pending motions for appointment of a lead plaintiff and lead counsel without decision.